Open Enrollment Options

EDITOR'S NOTE: This article was originally published in the October 2011 issue of Kiplinger's Retirement Report. To subscribe, click here.

The summer rituals of barbeques and beach books are behind us. Now it's time for a fall tradition: Medicare open enrollment.

SEE ALSO: Special Report on Navigating Medicare

Wincing at the thought of wading through all that fine print? You may be tempted to stick with your old plan, but while it may be a pain, you should give all of your options a thorough check-up. You may find that your current plan is raising co-payments and reducing coverage. Plus, new plans coming on the market may offer better deals than what you have now.

This year, you have from October 15 to December 7 to choose your Medicare Advantage or Part D prescription drug plan for 2012. That compares with November 15 to December 31 in past years. "A lot of people procrastinate, and maybe Christmas was the time they'd talk to friends and family about their options," says Jan Berger, chief medical officer for Silverlink Communications, a Burlington, Mass., firm that provides consumer information on Medicare Advantage plans. "This year, they have to back it up a holiday, to Thanksgiving."

By the end of September, you should have received your plan's "annual notice of change," which advises you of any alterations to plan benefits or premiums, or if the plan is being discontinued. "This is one piece of mail that you don't want to throw away," says Berger.

Advantage and Part D plans can start marketing their 2012 plans by October 1, when all information becomes available on Medicare's Plan Finder tool (www.medicare.gov/find-a-plan). This resource is great for comparing prices, co-payments, deductibles, coverage and drug tiers for all Advantage and Part D plans in your area.

If you're enrolled in an Advantage plan and don't take action by the deadline, you'll be automatically reenrolled in your current plan. Or coverage will shift to traditional Medicare if your plan folds in 2012. If you switch to traditional Medicare, you'll need a separate Part D plan to provide drug coverage and a Medigap policy to cover deductibles and co-payments.

If you didn't sign up for Part D or Medicare Advantage when you were first eligible, make sure not to miss this enrollment period. If you do, you won't have any drug coverage for 2012.

Earle Carpenter, 66, who lives in San Francisco, had been counting down the days until he qualified for Medicare. As a self-employed wine writer, he had been shouldering the full cost of health insurance. When he turned 65, he enrolled in Part A hospital coverage and Part B. "I thought I was all ready to go," Carpenter says.

But Carpenter didn't realize that he would have to buy a separate policy to cover drugs, so he did not sign up for Part D. He discovered his mistake in June when he was diagnosed with an atrial flutter -- an irregular heartbeat -- and was prescribed three medications that cost a total of $450 a month.

Without any drug coverage from Medicare, Carpenter has had to pay the full cost until he can sign up for Part D coverage, which will begin on January 1. "It cost me a lot of money by not being well-informed," he says.

For those on the fence about Part D, Carpenter's story is instructive. "Even if you're in great shape, something like this can pop up," he says. If you don't take any drugs now, consider a low-premium plan, even if it has higher co-payments.

Watch Out for Hidden Charges

Even if you're happy with your current drug plan, it may not be your best deal. A study of 25,000 Medicare beneficiaries by PlanPrescriber, a company that provides plan-comparison tools, found that fewer than 7% of customers were in the Part D plan with the lowest total out-of-pocket costs for their medications. The study also found that fewer than 10% were in the Advantage plan with the lowest out-of-pocket costs.

The average premium for Part D plans in 2012 is expected to drop a bit to $30, from $30.76, according to the federal Centers for Medicare and Medicaid Serv-ices. But those figures can mask hidden cost increases.

Besides watching for rising co-payments, take a close look at the "drug tiers." A plan may continue to charge the same amount for each tier of co-payments (such as $20 for generics, $30 for preferred drugs and $40 for nonpreferred drugs). But your costs can rise if a plan moves your drug to a more-expensive tier, perhaps from preferred to nonpreferred. And if you reenroll in your current plan without reviewing it first, you could face an even bigger surprise if the plan has dropped one or two of your drugs from its formulary.

Some new options could be cheaper, depending on the drugs and pharmacies you use. A few new low-cost Part D plans are expected to enter the business and compete with the Humana Walmart-Preferred Rx plan, which costs less than $15 a month in premiums in 2011. That plan also charges just $2 for preferred generic drugs and $5 for other generics at Walmart and Sam's Club, and no co-payment for generic drugs at RightSourceRx mail-order pharmacy.

Closely scrutinize the terms. For example, the costs for the Humana Walmart plan can be much higher if you have to take nonpreferred drugs or if you use nonpreferred pharmacies. You'll pay 20% of the cost of nonpreferred generic and preferred brand-name drugs at preferred pharmacies, compared with 37% at nonpreferred pharmacies. And if you buy nonpreferred brand-name drugs from preferred pharmacies, you'll pay 35% of the cost, compared with 50% elsewhere.

The "doughnut hole" will change little next year. In 2012, the coverage gap will kick in when your drug expenses total $2,930 for the year (including both your share and the insurer's share of the costs). At that point, you will generally have to pay all of your drug bills yourself until your out-of-pocket costs reach $4,700, when the federal government picks up most of the rest of the bill.

There continues to be a 50% discount on brand-name drugs in the doughnut hole in 2012. A federal subsidy to help cover the cost of generics will rise next year to 14%, from 7%. Before you select your plan, ask your doctor if you can switch to generic drugs. The plan with the best deal for brand-name drugs may differ from the one that's best for generics.

The good news is that it can be easy to compare your Part D options by using Medicare's Plan Finder tool. You can also use PlanPrescriber.com (call 800-404-6968 for personal help), which is owned by eHealth Inc., to compare Part D and Advantage plans.

Start your search on Medicare's Plan Finder by entering your Medicare number, last name and other personal information. (You can do a search without your personal information by typing in your zip code and clicking "Find Plans.") Enter the names of your medications and dosages. A box will pop up if there's a generic alternative to a brand-name drug in the list.

Select "prescription drug plans" and a list of Part D plans will appear. The first column estimates drug costs for your specific medications, including premiums, co-payments and other out-of-pocket expenses. You'll see if a plan with a low premium ends up costing more because of high co-payments. You will also see whether your drugs are in the plan's formulary and whether a drug requires prior authorization before it is covered. Click "Compare Plans" for your top choices, and you'll see when you're likely to reach the doughnut hole.

Compare Medicare Advantage Plans

You can sign up for an all-in-one Medicare Advantage plan rather than enrolling in traditional Medicare, a Part D drug plan and a supplemental Medigap policy for co-payments and deductibles. The premiums probably will be lower with an Advantage plan than with Medigap plus Part D, but the Advantage plan may have higher co-payments.

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